Malaysia’s state investment fund needs more money

Malaysia’s state investment fund 1Malaysia Development Bhd (1MDB) has boosted the target size of its planned initial public offering (IPO) of its energy assets to around $3 billion, Reuters reported on September 13, as the fund looks to repay debt incurred in a shopping spree for power plants. This would make the IPO one of Southeast Asia’s largest public stock offerings so far.

The public listing of 1MDB, which is chaired by Malaysia’s Prime Minister Najib Razak himself, has been delayed several times and originally sought to raise $1 billion to $2 billion. However, 1MDB is now expected to invite banks in October to formally pitch their services, and ready the fund for the $3 billion IPO by the first half of 2014.

The fund garnered much negative publicity prior to this year’s election, after $4.75 billion worth of debt offerings managed by Goldman Sachs were launched with few public details and kicked in massive fees for the investment bank. These transactions and others sparked criticism of the fund’s debt levels and prompted Najib’s political opponents, such as former deputy prime minister Anwar Ibrahim, to call 1MDB “a slush fund for the prime minister.” 1MDB countered that the allegations were an election ploy.

1MDB managed to get a six month extension until May 2013 to repay a $1.9 billion bridge loan to Maybank and RHB, a key step in allowing the fund to launch the planned IPO in the first half of next year, the report said.